My take on the commodity supercycle and stock market zeitgeist...and the new era of precious metals, uranium (just bottoming, btw)and alternate energy. As I have said here since 2005 "Get ready for peak everything, the repricing of the planet and "black swan" markets all over the place".

22 May 2009

Move from one economic chaotic attractor to another begins

I admire Jim Willie because he is not afraid to call a spade a spade. The Europeans at Leap 2020 also speck a major disconnect, as does your humble blogger; we don't agree on the details but few know them, if in fact they are knowable at all. The extent to which these processes are driven by the momentum of competing systems, planned geopolitical moves or an abrupt change in the network topology of the global infosphere caused by slow drift in the weightings of each node is difficult to determine.

Shit happens because stability breeds instability so I'd favour the third hypothesis because it accomodates the butterfly effect we see at inflection points in history.

I do rule out the Illuminati, the Elders of Zion or the alien lizard people, either individually or in cohoots, being behind the crisis, imaginary entities can be powerfull, surely, but their main power here is in the minds of those desperately seeking explanations that leave their ideology and victimhood intact without disturbing deeply rooted truisms. The dissonance between the values of the american revolution and the enormous energy and vitality of its civilisation in its heyday and the confusion of the bust must be accomodated.

But its difficult to assign blame, these processes of social and economic progress and decay seem to trancend the fashions of political or economic theory; they seem to me to require a syncretic theory of civilisational growth and decay, because the patterns seem general while the specifics vary wildly.

We only hope that while the locus of Western Civilisation may move east that the vitality of its promise remains and that even this massive geopolitical and monetary crisis is part of a larger theraputic process, a necessary breakdown on the rode to maturity.

OK, well, Gold is hot, imo......and less I digress further leave Jim Willie to speculate.....

The gold chart is wildly bullish, with a 1300 target. The gold price follows the cenHead & Shoulders pattern. The neckline is at 1000 and the top of the head is at 715. The nearly 300 point potential indicates a 1300 target, a number that has come up frequently in several different patterns identified. Notice the upward vector in both moving averages, as well as the cyclical index. The only resistance will be the illegal kind from naked shorting of futures contracts by the usual villains who operate at the behest of governments, protected from prosecution. They will not be able to stop what comes. A challenge of the 1000 level could come very soon. Once 1000 is penetrated in clear fashion, with excitement and attention, an overshoot of 1300 could even occur.tral banks monetization and diverse federal fiscal stimulus worldwide, and has ignored season. As the big banks struggle to survive, the central banks take extraordinary measures, and frontal assaults are waged against hedge funds, all patterns have been departed from. What replenishes big banks also leaks generally into the system in time. As the economic recessions show stubbornness, expect fiscal stimulus to be monstrous and almost endless. The reversal pattern is unmistakable, the classic Head & Shoulders pattern. The neckline is at 1000 and the top of the head is at 715. The nearly 300 point potential indicates a 1300 target, a number that has come up frequently in several different patterns identified. Notice the upward vector in both moving averages, as well as the cyclical index. The only resistance will be the illegal kind from naked shorting of futures contracts by the usual villains who operate at the behest of governments, protected from prosecution. They will not be able to stop what comes. A challenge of the 1000 level could come very soon. Once 1000 is penetrated in clear fashion, with excitement and attention, an overshoot of 1300 could even occur.

1) The US-UK banking systems are shattered by deep bond asset losses, shrouded in fraud, deep with leverage, teeming with collusion, which renders them as insolvent and in need of transfusions. The reality is that Wall Street firms remain in control of the USGovt financial operations despite their responsibility for both the collapse and clear legal violations. The USDollar image is badly tarnished.

2) Incredible volumes of money have been committed by the US Federal Reserve and the USGovt, much already delivered, with staggering future rescues, bailouts, and stimulus packages assured. The sums total $12.8 trillion at last count. The undermine, if not debauchery, to the USDollar and its vehicle the USTreasury Bond is vividly clear, a palpable threat to foreign creditors.

3) Foreigners have begun to worry openly about the onset of profound price inflation. What normally had been less than 4% in excess bank reserves is now 92%. US banks will channel the bulk of their excess reserves into loans and investments, when considered safe. The baseless ‘All Clear’ signal can be witnessed, orchestrated and phony. For political and credit market reasons, do not expect any noticeable central bank drain. Price inflation awaits the landscape on a path of least resistance. The USTBond yield would rise, and lose colossal sums of money for foreign bondholders.

4) Foreign creditors have owned over half the US$-based government and mortgage agency bonds for almost a decade. With the dependence upon foreign institutions (central banks and sovereign wealth funds), the United States has quietly lost control of its fate. It can no longer make decisions without consulting major creditors.

5)The USMilitary has tacitly been supporting the value of the USDollar. By pressuring the Saudis on a regular basis, they have maintained the Petro-Dollar standard without a peep of objection for a few decades. When South Korea expressed interest in diversifying out of USTreasury Bonds a few years ago, suddenly some US naval exercises occurred off their coast. The pattern is clear to foreigners.

6) Some recognition has come that the aggressive USMilitary of recent years depends heavily upon USTreasury Bond sales in order to continue their adventures. As long as the USDollar is pre-eminent, the USMilitary will continue to play in neighbor’s back yards doing whatever.

7) The Chinese have been taking numerous steps to establish the yuan currency more as a global currency for international commerce. The more important step has been to set up numerous yuan swap facilities across the globe, the latest being in Argentina and Brazil. Others are across Europe and Asia. Such facilities make easier trade in high volumes, without need for settlement in US$ denomination, as has been the custom for a few decades.

8) The Chinese have begun to switch from a US$ basis to a yuan basis in their banking system domestically. They also have given a giant assist to the new emergency fund for the extended ASEAN group of SouthEast nations. My belief is that the fund, based in yuan currency, will morph into a regional development fund. Conversation already has lead in that direction.

9) The Chinese gave authorization to two banks outside the Middle Kingdom proper to sell yuan-based government bonds. The HSBC (based in London) and Bank of East Asia (based in Hong Kong) have been given permission to do so, with details to follow. More broad-based formal trading of Chinese Govt bonds is coming soon to a nation near you.

10) Watch their moves toward creation of the Chinese yuan as a global reserve currency. Watch their simultaneous moves away from the USDollar and toward gold for reserves management. The merger of the two important strategic initiatives is a gold-backed yuan currency. In fact, that is precisely what was stated openly by Zheng Lianghao, managing director of the World Gold Council’s Far East division. That news came out this week. The Chinese are clearly the spearhead to dethrone the USDollar as global reserve currency.

11) Numerous nations have stated publicly that they regard the USDollar as inadequate and unqualified to serve any longer as the sole global reserve currency. The isolated revolt has turned into a uniformly global revolt. They are blaming the US$ for their internal crises.

12) Russia demanded an alternative to the USDollar before the G20 Meeting in London, at the G20, and after the G20. Russia and China endorsed the IMFund plan to create a basket currency as a global reserve alternative. My personal view is that the concept was and is a Straw Man device that will pave the way to a new global reserve currency, or set of currencies later. The motive was to direct attention away from the USDollar, and heap some disgrace at it.

13) The Arabs have been planning for over two years an asset-backed new currency for the Gulf region. New crude oil purchases would ostensibly be conducted in the new dinar denomination, bringing an end to the Petro-Dollar standard. In early May, the decision was made to locate their new central bank in Riyadh. NOW THE EXIT FROM THE MONETARY UNION BY THE UNITED ARAB EMIRATES SIGNALS SOMETHING BIGGER. MY BELIEF IS THAT THE U.A.E. REJECTED THE SAUDIS DUE TO TIGHT USGOVT BEDFELLOW RELATIONS. THE U.A.E. WILL NEXT COURT A GRANDIOSE ACCORD WITH RUSSIA. THE NEW ALLIANCE WILL INCORPORATE A NEW CURRENCY, NEW PLEDGES OF SECURITY PROTECTION, AND A COORDINATION OF CREDITOR ACTIONS. The Creditor Nations will soon tighten the noose around the necks of Debtor Nations, and force a global banking shift of power. It will be astonishing in its effect.

14) The Germans have demanded all of their gold held in custodial accounts inside the United States to be returned to German soil. The story is not public, but details have come to me from a private source close to the action. The Germans have also given counsel for Dubai to demand all of their gold held in custodial accounts inside London to be returned to Dubai, where a new gold trading center will spring up. In my view, THIS IS THE BIGGEST NEWS FOR GOLD THIS ENTIRE YEAR. The hidden arch-enemy for the US-UK on all matters pertaining to gold bullion is Germany. This is not a well-known concept. Insults were hurled at the US delegation during the London G20 by their ministers. Germany is also advising the Chinese on currency and gold matters. Can one detect some coordination?

15) Venezuela has followed the Chinese and Russian pattern to lock up the majority of domestic gold mining output. They will keep most gold output in domestic hands, primarily with the government, which will have first crack at buying it.

16) A near default was averted at the Eleventh Hour when Deutsche Bank found almost a million ounces of gold to cover its (naked) short in gold futures at the COMEX at the end of March. Thanks to the Euro Central Bank, which happened to sell over a million ounces for some reason. My conjecture is that the Germans decided the time was not right to bust the COMEX. From sources, that date might be this September in a coordinated attack that requires preparations to remove the levers and kick out the pillars that support the COMEX.

17) Germany has been the broker in creating a Russian-German barter deal involving billion$ in trade between the two nations. Credits will be gained from delivery of a raft of commodities, led by energy products from Russia. In turn, Russia will receive finished products, equipment, and consumer staples. Germany has been the broker in a similar barter accord between Russia and China under similar terms. These barter deals will create entire systems that bypass the US$-denominated trade settlement.

18) The Chinese announced an increase in their gold reserves from 400 tonnes to 1050 tonnes in the last five years. At the same time, they have been harping on the extreme risk to their $2000 billion in savings, held in USTreasury Bonds, USAgency Mortgage Bonds, and USCorporate Bonds. They openly complain about US$ mismanagement, unbridled USGovt spending (for numerous crisis projects), and the resulting risk to the US$ exchange rate. They have engaged a war of words, precursor to trade war, with USDept Treasury officials, one that has lasted for at least two years. The Chinese have openly talked about a covert USTreasury Bond default, which is a very serious accusation to make.

19) The Chinese Business News (CBN) has made several queries with the GATA group, the US-based outfit challenging the USGovt on the legitimacy of the USDollar on a Constitutional basis, and challenging the USGovt on its illegal naked shorting of gold futures contracts in a long-running gold price suppression scheme. The Chinese might be building a weapon to challenge the USDollar’s legitimacy, in response to stupid currency manipulation charges lodged by the hack USGovt bureaucrats in high offices.

20) Either lawsuits or Congressional Bills have begun against the US Federal Reserve to force a formal accounting of their balance sheet, and of the gold contents at Fort Knox. A surprise would await them, to learn no gold exists at Fort Knox. Another lawsuit has begun to force the USFed to reveal the spending of the T.A.R.P. funds. Foreigners must watch the Wall Street syndicate with some degree of disgust. Watch the Supreme Court enter the picture.

21) Meanwhile, the big US banks are maneuvering themselves to return T.A.R.P. funds when their insolvency is obvious, their balance sheet accounting is phony, and numerous events have begun or are planned to raise equity capital. They are rectifying their capital inadequacy and vanished loan loss reserves. The real reason they plan to return USGovt funds is to put an end to the extreme risk of underlings at the USDept Treasury, Congressional Budget Office, Govt Accountability Office, and various Congressional Banking Committees who have had access to records, the paper trails. Eight months have passed since TARP funds were injected into big banks, giving way too many eyes too much access. The situation is not manageable, an unexpected grand intrusion after fund confiscation. The financial (crime) syndicate must be protected. Quite a contrast event, in view of foreign actions listed above.

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No man is free who is not master of himself.A ship should not ride on a single anchor, nor life on a single hope.Fortify thyself with contentment: that is an impregnable stronghold.

If you desire great things, do not attempt to lay hold of them with little effort; but give up some things entirely, and postpone others for the present.

Epictetus

The first and greatest victory is to conquer yourself; to be conquered by yourself is of all things most shameful and vile.

Plato

“The great enemy of clear language is insincerity. When there is a gap between one's real and one's declared aims, one turns, as it were, instinctively to long words and exhausted idioms, like a cuttlefish squirting out ink.”

George Orwell

Any one who thinks, and is determined to let nothing stop him from thinking, is a philosopher . . .R. G. Collingwood ~An Essay on Philosophical Method, 15.

Civilisation came through two things chiefly: the home, which developed those social dispositions that form the psychological cement of society; and agriculture..... But it was woman who gave man agriculture and the home; she domesticated man as she had domesticated the sheep and the pig. Man is woman's last domestic animal, and ....the last creature that will be civilised by woman. The task is just begun.

Will Durant

Great perils have this beauty, that they bring to light the fraternity of strangers.

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What we now suffer in economics is a hardness of intellect, a meanness of spirit, a narrowness of vision and a rigidity of thinking that utterly distorts the role of what economics in our society should be. Instead of economics being our tool for societal advancement, happiness, health, and sustainability, the profession has lost its way in econometrics, neo-liberal cant and equlibrium theory. It has become little more than cheerleaders to our enslavement to a towering edifice of debt, consumption and greed and the mouthpiece of vested interests. Unless repudiated we face not only economic but soceitial and ecological collapse. KMcKern ~ News Kontent